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EMC looks to vault into consulting

EMC looks to gain from the increased complexity of high-end data storage, increasing efforts to sell consulting and data housing services.

EMC is moving to profit from the increased complexity of high-end data storage, increasing efforts to sell services such as consulting and data housing to other companies.

EMC has quietly been building up a consulting group, the Internet Solutions business unit, that designs storage solutions. The company is also serving as a data storage center for select corporate clients, said John Montgomery, who handles EMC's Internet programs.

Today, EMC announced the promotion of David Donatelli to the position of vice president of new business development, where he'll oversee the Internet Solutions group. Donatelli also will watch for merger and acquisition deals and add new technology and services into EMC's business, the company said.

Already, EMC boasts such well-known clients as Excite, Amazon.com, legal publishers Matthew Bender, and Lexis-Nexis (interestingly, the latter duo have agreed to merge). EMC also has several other data housing customers, including Fortune 500 corporations as well as smaller Internet startups, a spokesman said.

The increased emphasis, fueled by the Internet's requirement for more and better storage, is an expansion of the company's bread-and-butter sales of arrays of hard disks that can plug into everything from mainframes to Windows NT-based servers.

People buying desktop computers with built-in hard disks tend to think storage is simple, said David Hill, an analyst at Aberdeen Group. "But when you're getting into the high level, storage is a very complex marketplace with choices you have to weigh very carefully: performance, reliability, price," he said.

Technology executives have focused mostly on networks and servers instead of storage, Hill said. "While they've become more sophisticated [about storage] over the last half dozen years, it's always helpful to bring in a consultant.

The Internet lies behind the phenomenal growth of storage. Simply put, Internet access creates data, which creates a need for storage. The fact that companies are promoting the Web as a transaction medium for commerce is compounding the need for storage as records of all these transactions have to be kept.

On top of that, the existence of these "higher-level" functions such as commerce or Web email forces Web site owners to protect their sites against contingencies. Sites have to now operate seven days a week, 24 hours a day, around the world, and be ready for sudden surges of business.

In this milieu, data storage has emerged as a business in its own right. In a certain light, some of these businesses can be looked at as real estate management companies, said Montgomery: They exist because other people do not have the space or equipment to store their own data.

EMC's efforts in services are essentially targeted at capitalizing on the need to control this mass of data. Software is another area of growth. Software revenue grew from $75 million in 1996 to $445 million last year.

"From a pure storage perspective, it would be exciting for us regardless," said Montgomery.

Taking a load off
Sun Microsystems, with its "the network is the computer" motto, was a pioneer in the concept of outsourcing computing tasks to other companies across a network, but the philosophy has been adopted by others as well, including Hewlett-Packard with its e-services campaign and Seagate, which is focusing just on outsourced storage.

Tom Porter, Seagate chief technology officer, said last week that HP's e-speak technology, which links services over the Internet, "will help companies like Seagate to provide storage services to the Internet."

Although it is providing hosting, EMC will likely focus more on consulting services, said Doug Chandler, senior analyst at International Data Corporation.

Outsourcing storage is a tricky issue, Hill said, mostly because businesses are reluctant to let go of control of so-called mission-critical data.

In addition, outsourcing data raises the issue of outsourcing other computing services as well, such as the servers that interact lie between users and the storage systems. "When you outsource your data, why don't you outsource your servers as well? Where do you draw the line?"

But EMC isn't the only player in storage consulting, said Hill and Chandler. "All of the storage companies have been rapidly building their consulting groups," Chandler said.

Hill pointed to HP--long an EMC ally but now a foe--as one company that's beefing up its appeal as a high-end storage services company. IBM, too, has thrived on the complexity, with its Global Services division turning in bigger and bigger profits compared to the revenue from its business of selling hardware.

Whether EMC can gain a competitive advantage over HP and others in the consulting area will depend on how well it executes, Hill said. But the company is starting from a position of strength. "Their technical people are very strong. People are confident in their ability to execute," he said.

EMC arguably is already heavily in the service business because of its warranty policies. All EMC systems come with a mandatory two-year warranty contract, with an option for extension, according to an EMC spokesman. Wherever a company is located, an EMC representative will come check out the unit if there's a problem. Most of the company's field engineers are located in Cork, Ireland, or Hopkinton, Massachusetts, while others are scattered geographically.

The warranty work, the spokesman added, is not a profit center for the company, but run mostly to improve customer satisfaction.

EMC's strong adherence to providing customer service itself, in fact, constituted one of the reasons that the HP relationship splintered, said a spokesman. Under the existing HP-EMC deals, EMC sells the storage equipment under its own brand name and services these systems with technicians of its own under the EMC name.

Under a new plan, HP will resell high-end storage products from Hitachi Data Systems under the HP label.